If one thing has defined business in the past 24 months, it’s supply chain issues. Businesses across just about every industry have felt the impact of the pandemic in their supply chain. As some struggle to keep up with the product demand, others have an overflow of inventory with limited shipping containers to get items to their destination: the consumer. 

Every aspect of the supply chain is feeling the pinch. From manufacturing to shipment to logistics, everyone is feeling the wrath of supply chain shortages. A handful of the  problems you may be experiencing include:

  • Longer lead times
  • 10x increased shipping cost
  • 12+ month wait for pre-orders
  • Increase in storage pricing
  • And so much more

Locally-based companies, like dispensaries for example, have fewer problems with their main product which is locally sourced, and more challenges with regard to supplies that keep the business running – packaging, storage, shipping, and more. 

Where many companies never had to plan further out than pandemic-related supply chain challenges mean that business owners are finding themselves inventory forecasting 9, 12, 18, or even 24 months in advance. 

By now, you know you’ve got to do a better job of inventory forecasting…so how do you know you’re on the right track, especially in today’s world? 

Inventory Forecasting in the 2022 and Beyond

For years, I’ve told clients not to keep inventory on hand because it’s not liquid. Even if there were a delay in shipping or processing, you would have a dependable amount of inventory to keep your shelves stocked and your consumers happy. Historically, it was always true.

We also used to tell business owners, “don’t spend money on items that you don’t need on hand.” This used to mean keeping only enough stock to keep your shelves stocked without overcrowding your backstock. 

But that was 20 years ago. Heck, that was TWO years ago. Now, it’s a whole different ball game. 

Now, inventory is an actual commodity, and we find ourselves telling business owners, “if you can get it, PLEASE buy it!” 

You can no longer predict how long you will wait for your next order to arrive. And even if your stock is ready, you may experience unforeseen delays in shipping, stocking, and more… things that were unheard of in the pre-pandemic years.  

If the nature of business has changed, how can small businesses, like yours, get ahead of the inventory forecasting curve? 

One word: savings

The Value of Savings Over Lines of Credit

Looking at your personal spending, what would you assume could help your finances most in the long run? Having additional savings? Or, having multiple lines of credit?

To our team, one thing is clear: the real payoff lies in savings.

In business, the concept is similar. While credit may be the best choice if you don’t have savings or even in the moment, your business will feel the impact for weeks, months, and years to come as you play catch up and pay interest fees.  

As a business owner, you need savings for more than paying for taxes —  which you should already be doing –- and prepares you for the “rainy day” (or week, or month, or quarter) every business is bound to have (for example — unforeseeable supply chain issues)

Savings is for growing your business as well as for a rainy day, and at its core,  it’s not that different from good household budgeting. In your business, you’ll balance operating costs with the amount of income your business earns each month, quarter, or year.

So how much money should be in this fund? Historically, I’ve told business owners to keep funds worth about the same as the average value of inventory on hand. Now, this value may be a little difficult to calculate with supply chain issues. Instead, I suggest saving a minimum of 2 months of operating and inventory costs and ideally enough for 6 months to two years. 

How to get started

The bottom line is this: we don’t know how long supply chain issues will be prevalent in the modern market, and now is the perfect time to start inventory forecasting if you have not already.

If you’re not sure where to start, we’d love to help.

Our team can help create and enact your inventory forecasting plan to keep your business on the right path for any unforeseen and possibly seen circumstances to come.
Schedule a call today to build the best plan and prepare your business for decades to come.